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Equities
U.S. stock futures were lower early Wednesday as a contentious U.S. presidential debate raised investor concern over the likelihood of a clear result on election day. Major European markets were mixed as the day progressed. TSX futures steadied even as crude prices continued the previous session’s losses.
Dow, S&P and Nadaq futures were all weaker just ahead of the North American open, but improved from earlier in the session. All three ended Tuesday’s session in negative territory amid concerns over rising coronavirus infections. All three U.S. indexes are on track for monthly losses in September. The S&P/TSX Composite Index finished Tuesday down 0.19 per cent on the back of deep losses in the energy sector.
Canada’s main stock index started higher Wednesday after a reading on economic growth in this country came matched market forecasts. South of the border, major indexes also managed a positive open with a better-than-expected report on private hiring helping offset uncertainty emerging from the first presidential debate.
At 09:33 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 24.9 points, or 0.15 per cent, at 16,236.42.
In the U.S., the Dow Jones Industrial Average rose 61.98 points, or 0.23 per cent, at the open to 27,514.64.
The S&P 500 opened higher by 5.74 points, or 0.17 per cent, at 3,341.21. The Nasdaq Composite gained 7.65 points, or 0.07 per cent, to 11,092.90 at the opening bell.
“U.S. markets have shaken off the weakness seen overnight and are moving higher once again, with hopes of more progress on a stimulus package helping to outweigh the concerns about the election highlighted by last night’s debate,” IG chief market analyst Chris Beauchamp said.
“The Treasury Secretary said that he was ‘hopeful’ that some kind of a deal would be done, and this has meant that, after a slow start, U.S. indices have moved firmly into positive territory.”
Uncertainty over the presidential election stemming from Tuesday’s debate was also mediated by new numbers showing that U.S. private payrolls rose by more than expected in September.
Private payrolls increased by 749,000 jobs this month, the ADP National Employment Report showed on Wednesday. Data for August was revised up to show 481,000 jobs added instead of the initially reported 428,000. Economists polled by Reuters had forecast private payrolls would rise by 650,000 in September.
In this country, investors got the latest reading on GDP as the country recovers from the COVID-19 shutdowns earlier in the year. Statistics Canada said the economy grew 3 per cent in July, matching market forecasts and early estimates from the government agency. However, Statscan also said early estimates also show a moderation in growth in August, with projections for growth of 1 per cent.
“Easing up on Covid-19 restraints fed into solid Canadian GDP gains in July and August, but the concerns now are whether we will pay for some of that greater openness,” CIBC chief economist Avery Shenfeld said.
“July’s gain was broadly based, with outsized advances for sectors like hospitality that benefited from reopenings and patio service, although these sectors remained miles below pre-COVID levels,” he said. “In contrast, retailing grew much more slowly as it had already recouped prior declines, and the flash estimate points to a small retreat in August.”
He said Wednesday’s report is consistent with CIBC’s call for about 46-per-cent annual growth in the third quarter but the slowing in August and the recent surge in virus cases suggest a much smaller gain is in store for the fourth quarter.
On the corporate side, shares of Walt Disney Co. were down slightly in early trading after the company said it would lay off 28,000 workers at its parks division in California and Florida. Two-thirds of the planned job cuts involve part-time workers but they ranged from salaried employees to non-union hourly workers.
In Canada, the Globe’s Emma Graney reports that Calgary-based TC Energy Corp. has laid off line workers and managers in its natural gas division as the industry continues to shed jobs in the face of low demand and declining revenues as a result of the pandemic. TC Energy would not provide the number of employees affected, but said in an e-mail its Canadian gas operations and projects team is being restructured.
Major European markets were choppy with the pan-European STOXX 600 reversing early losses to rise 0.09 per cent in afternoon trading. Britain’s FTSE 100 edged up 0.09 per cent. Germany’s DAX and France’s CAC 40 fell 0.17 per cent and 0.06 per cent.
In Asia, the Shanghai Composite Index slid 0.2 per cent. Hong Kong’s Hang Seng gained 0.79 per cent. Japan’s Nikkei lost 1.5 per cent. Markets drew some support from better-than-expected economic figures out of China. A new report showed China’s factory activity expanded at a faster pace in September, helped by rising export orders. The official manufacturing Purchasing Manager’s Index (PMI) rose to 51.5 in September from 51.0 in August. Analysts had expected it to pick up slightly to 51.2.
Commodities
Crude prices steadied but still looked set to record a steep monthly decline as rising coronavirus infections continue to stoke concerns that further government restrictions will hamper a recovery in demand.
The day range on Brent is US$40.46 to US$40.88. The range on West Texas Intermediate is US$38.71 to US$39.25. Both benchmarks lost more than 3 per cent on Tuesday.
“Oil futures fell precipitously Wednesday amid mounting fears the oil demand recovery in the United States, the world’s biggest oil consumer, could slow due to COVID cases' resurgence in New York, leading to stricter mobility restrictions in the economic powerhouse North Eastern corridor,” AxiCorp chief global market strategist Stephen Innes said.
While markets drew some solace for U.S. weekly inventory numbers from the American Petroleum Institute showing a decline in domestic stockpiles, he said those numbers may just be a "temporary bandage over the “oil price hemorrhaging.”
“The oil complex will remain super sensitive to any adverse healthcare or lockdown headline concerns,” he said.
Later Wednesday, markets will get more official inventory figures from the U.S. Energy Information Administration. That report is due shortly after the North American open.
In other commodities, gold prices were lower and looked set for their biggest monthly drop in almost four years, hampered by a stronger U.S. dollar.
Spot gold fell 0.6 per cent to US$1,886.78 per ounce, declining 4.2 per cent so far in the month in what would be its worst monthly performance since November 2016.
U.S. gold futures were down 0.5 per cent at US$1,893.40.
Currencies
The Canadian dollar held near the upper end of the day range after Statistics Canada said economic growth in July matched market forecasts.
The range for the day so far on the loonie is 74.51 US cents to 74.86 US cents.
Statscan said growth in July came up at 3 per cent. That was in line with economists' expectations but also suggested a slowing in the growth rate from May and June. Statscan also said Wednesday that early estimates suggest growth in August of about 1 per cent.
On global markets, the U.S. dollar index edged higher in Europe after two days of declines, creeping above the 94 mark.
The euro lost 0.18 per cent against the U.S. dollar at US$1.1722.
The U.S. dollar rose 0.28 per cent against the Swiss franc at 0.9218 franc, after falling as low as 0.9191 franc overnight, according to figures from Reuters.
Against the yen, the U.S. dollar was steady at 105.56 yen, below a two-week high of 105.74 overnight.
More company news
Royal Dutch Shell announced on Wednesday plans to cut up to 9,000 jobs, or over 10 per cent of its workforce, as part of a major overhaul to shift the oil and gas giant to low-carbon energy. Shell, which had 83,000 employees at the end of 2019, said that the reorganization will lead to additional annual savings of around $2-billion to $2.5-billion by 2022, going partly beyond cuts of $3-billion to $4-billion announced earlier this year.
Canadian security firm GardaWorld on Wednesday announced its final offer to buy G4S Plc for about 2.97 billion pounds (US$3.81-billion) in a hostile bid, weeks after its previous offer was knocked down by the British company. Under the terms of the offer made by GardaWorld through its unit Fleming Capital Securities, G4S shareholders will receive 190 pence per share in cash. G4S was not immediately available to a request for comment.
China is preparing to launch an antitrust probe into Alphabet Inc’s Google, looking into allegations it has leveraged the dominance of its Android mobile operating system to stifle competition, two people familiar with the matter told Reuters. The case was proposed by telecommunications equipment giant Huawei Technologies Co Ltd last year and has been submitted by the country’s top market regulator to the State Council’s antitrust committee for review, they added.
U.S. casino operator Caesars Entertainment agreed on Wednesday to buy British-based gambling group William Hill for 2.9 billion pounds to expand in the fast-growing U.S. sports-betting market. The U.S. group, owner of Las Vegas’s Caesars Palace, intends to sell William Hill’s non-U.S. operations, including more than 1,400 UK betting shops, and said it would integrate the U.S. business into Caesars with few, if any, job losses.
The New York Stock Exchange on Tuesday set a reference price of $7.25 per share for Palantir Technologies Inc, valuing the data analytics company at a $15.8-billion ahead of its public market debut on Wednesday. While the valuation was lower than the $20 billion that Palantir fetched in a 2015 private fundraising round, the reference price is not an offering price for investors to purchase shares, but rather a benchmark for performance when the stock starts trading on the stock exchange on Wednesday.
Economic news
(8:15 a.m. ET) U.S. ADP National Employment Report for September.
(8:30 a.m. ET) Canada’s Real GDP for July.
(8:30 a.m. ET) U.S. Real GDP for Q2.
(10 a.m. ET) U.S. pending home sales for August.
With Reuters and The Canadian Press
Terry Weber